Some others, including myself, are attempting to do the same thing with adding an XGA display to a clamshell iBook, which uses SVGA.
Check it out here:
http://forums.macnn.com/73/mac-modif...cd-cd-logic/4/
From what we've figured out so far, it's some kind of problem between OS X and the logic board. OS X is looking for a specific piece of information from the display, and it expects the display to be the one that came with the PowerBook. Forcing it to see the new display is proving to be somewhat difficult.
First thing you want to do is create an Ubuntu LiveCD from the ubuntu website (ubuntu.com). Boot off it. If Ubuntu sees the full resolution of the display, you know it's an OS problem. If it doesn't, you know it's a hardware problem, like a misconfigured cable or something.